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Molecule and Market Studies Capture Nobel Laurels

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Science  18 Oct 2013:
Vol. 342, Issue 6156, pp. 298-299
DOI: 10.1126/science.342.6156.298

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This year's Nobel Prize in chemistry honored three U.S.-based scientists for advances in computer modeling of large, complex molecules. Martin Karplus, Michael Levitt, and Arieh Warshel combined classical and quantum approaches to simulate reactions that had stymied traditional approaches. The economics Nobel (formally, the Sveriges Riksbank Prize in Economic Sciences) went to three academic economists who studied why prices of stocks are so hard to predict. In the 1960s, Eugene Fama and colleagues showed that stock markets respond to new information too quickly for analysts to predict prices in the short term. Robert Shiller later discovered that markets eventually tend to correct overpricing and underpricing, making prices more predictable over several years. Finally, Lars Peter Hansen showed that psychological factors such as investors' optimism or pessimism play a much larger role in pricing than traditional "cold calculation" theories had assumed.